I am a CIMA qualified accountant so dont have experience when it comes to financial tax and im hoping I could receive some advice in relation to my partner and capital gains tax on overseas share trading.
He is a UK resident (UK tax payer) and looking to trade US stocks on a platform called Interactive Brokers. They allow him to keep his base currency balance on their system in GBP, and take a loan in USD secured against his GBP balance (the USD loan amount is calculated using the GBPUSD fx rate on the day the loan is opened, the loan interest rate is a reasonable 1.58% yearly).
He can then use the USD loan to purchase US shares without ever having to change his GBP balance to USD, and in the process mitigating foreign currency risk (and also ruling himself out for any possible foreign currency gain).
My concern is that he would be liable for capital gains tax on any perceived fx gain on the shares due to HMRC requiring overseas share purchases/disposals to be converted back to GBP for tax purposes. (He wont actually receive any fx gain himself due to taking the USD loan out and buying the shares using the loaned USD).
I'm wondering whether the Interactive Brokers loan amount can be used to net off against any perceived fx gains (or losses)?
Please see this example where I have shown the loan amount as part of the transaction:
Acquisition: 01.01.20, GBPUSD 1:1.5
ABC.USA shares purchase price per share £100 ($150)
Interactive Brokers Loan liability £100 ($150)
Disposal: 31.01.20, GBPUSD 1:1.2
ABC.USA shares disposal price per share £125 ($150)
Interactive brokers loan repaid £125 ($150)
Gain/loss on share disposal = £25
Gain/loss on loan repayment = -£25
Net = £0
I appreciate any advice or input.